Big Society Capital has launched a £15m investment facility for social investors to fund large-scale community-led housing projects across the UK.

The facility will provide development finance to larger, mainly urban, community-led housing projects after they have received planning permission. It is expected that such projects will require a mix of funding that includes both senior and subordinated development finance, as well as an element of subsidy, such as gifted land, and/or grant funding. It will focus on meeting the need for subordinated finance as this is where there is likely to be insufficient capital available to meet projects’ needs and where there is a risk of a market gap developing.

Projects will repay the development finance from either the sale of homes or refinancing with long-term debt that will be serviced by the rental elements of the scheme.

The FSE Group, Northstar Ventures and Social and Sustainable Capital (SASC) will be the first group of social investors that can access the funding facility to invest in projects that need more than £1m of investment. Additional investment from social banks, local authorities, foundations and other grant-makers could potentially increase the amount available to community-led housing projects to £75 million. By providing social investors with additional capital, Big Society Capital hopes that a greater number of large-scale community housing projects, particularly in large urban areas, will get off the ground.

This fund will be useful to Community Land Trusts, Cohousing, Cooperatives and self-help housing groups who want to bring forward self-build and custom housing projects at scale but are struggling to secure appropriate finance. Projects like the recently completed ‘New Ground’ Older Womens custom build Cohousing project in High Barnet, London (see above image) which provides 17 flats for sale on 250-year leases and eight for social rent are likely to be suitable candidates to receive funding support. ‘New Ground’ was designed for the Older Women’s Cohousing group (OWCH) by London-based architects Pollard Thomas Edwards who worked with Hanover Housing Association to deliver the scheme.

The fund is also capable of being combined with existing funding which is already available through the Government’s new Home Building Fund and seedcorn funding available through Neighbourhood Planning Grant & Technical Support and community-led housing support funding.